ECONOMIC SCENARIOS GUIDE

Transcription

1 Advisor use only SUN LIFE GIFS ILLUSTRATION TOOLS ECONOMIC SCENARIOS GUIDE Sun GIF Solutions INVESTMENT SERIES ESTATE SERIES INCOME SERIES Sun Lifetime Advantage GIF Life s brighter under the sun

2 CONTENTS Introduction economic scenarios Hypothetical economic scenarios Management expense ratios Fixed rate scenario Calendar year returns Sun GIF Solutions Investment Series Calendar year returns Estate Series Calendar year returns Income Series Income rate scenarios Income Series Calendar year returns Sun Lifetime Advantage GIF Calendar year returns Income rate scenarios SUN LIFE GIFS ILLUSTRATION TOOLS ECONOMIC SCENARIOS GUIDE

3 Introduction This guide explains the various economic scenarios used in the Sun Guaranteed Investment Fund (GIF) Solutions and Sun Lifetime Advantage GIF illustration tools. All of the returns shown in this guide assume a default asset allocation of 60% equity and 40% fixed income. Changing the asset allocation in the illustration tool will result in changes to the as a general rule, increasing the equity allocation will result in a higher long-term return and higher volatility. HISTORICAL ECONOMIC SCENARIOS The illustration tool provides several historical economic scenario options. In these scenarios, the fixed income returns reflect the historical returns of 60% FTSE TMX Canada Long Term Bond (%Total Return) and 40% FTSE TMX Canada Canadian Treasury Bill 91 Day (%Total Return). The equity returns reflect the historical returns of 60% S&P/TSX Composite Index and 40% MSCI EAFE Index. The returns repeat until the annuitant reaches the age of 100. HYPOTHETICAL ECONOMIC SCENARIOS The illustration tool also provides hypothetical return options, including a fixed rate of return, strong early performance, poor early performance and high volatility. MANAGEMENT EXPENSE RATIOS The historical and hypothetical rates of return in each illustration are compounded annual returns net of management expense ratios (MERs) over the illustrated period. The applicable MERs are: Sun GIF Solutions Investment Series 2.60% Sun GIF Solutions Estate Series 2.90% FIXED RATE SCENARIO Sun GIF Solutions Income Series 2.75% Sun Lifetime Advantage GIF 3.85% Returns generated using a fixed rate scenario (available range: 0% - 8%) are net of MERs. For Sun GIF Solutions illustrations, the selected fixed rate applies to both Investment Series and Estate Series. The fixed rate scenario isn t available for Income Series. CALENDAR YEAR RETURNS The calendar year return tables show the annual returns for each of the scenarios. They also include the average return and standard deviation for each. See footnotes for additional information about the average return and standard deviation. 3 SUN LIFE GIFS ILLUSTRATION TOOLS ECONOMIC SCENARIOS GUIDE

4 Sun GIF Solutions INVESTMENT SERIES CALENDAR YEAR RETURNS Years (%) Strong early Poor early High volatility (%) (%) (%) (%) Average Standard deviation The average return was calculated using the geometric mean, which is a common method of calculating investment returns. 2 Standard deviation is a statistical measurement that provides information on historical volatility and is used to measure the historical risk of an investment. Generally, the more risky an investment is, the higher the standard deviation will be. A volatile investment will have a higher standard deviation while a less risky investment will have a lower standard deviation. 4 SUN LIFE GIFS ILLUSTRATION TOOLS ECONOMIC SCENARIOS GUIDE

5 ESTATE SERIES CALENDAR YEAR RETURNS Years (%) Strong early Poor early High volatility (%) (%) (%) (%) Average Standard deviation The average return was calculated using the geometric mean, which is a common method of calculating investment returns. 4 Standard deviation is a statistical measurement that provides information on historical volatility and is used to measure the historical risk of an investment. Generally, the more risky an investment is, the higher the standard deviation will be. A volatile investment will have a higher standard deviation while a less risky investment will have a lower standard deviation. 5 SUN LIFE GIFS ILLUSTRATION TOOLS ECONOMIC SCENARIOS GUIDE

6 INCOME SERIES INCOME RATE SCENARIOS Income rates Income rates are based on a number of factors and are subject to change daily. For current rates, please visit Income rate scenarios The illustration tool depicts four income rate scenarios: current, increasing, decreasing, and volatile. These different scenarios show how the product can work in a variety of environments. The income rate scenario you choose determines the rate of return. The rates of returns reflect historical returns of 60% FTSE TMX Canada Long Term Bond (%Total Return) and 40% FTSE TMX Canada Canadian Treasury Bill 91 Day (%Total Return) from , with slight adjustments in the increasing, decreasing and volatile scenarios as outlined below. CURRENT INCOME RATE SCENARIO This scenario uses current income rates and assumes they don t change. The calendar year returns are based on historical returns for the indices above. INCREASING INCOME RATE SCENARIO This scenario assumes that income rates are slightly higher than the current income rates. It uses income rates that have been adjusted 0.70% upwards from the current income rate scenario. The calendar year returns are based on the indices listed above, but are adjusted to reflect slightly below-average returns. DECREASING INCOME RATE SCENARIO This scenario assumes that income rates are slightly lower than the current income rates. It uses income rates that have been adjusted 0.70% downwards from the current income rate scenario. The calendar year returns are based on the indices listed above, but are adjusted to reflect slightly above-average returns. VOLATILE INCOME RATE SCENARIO This assumes that income rates increase and decrease from the current income rates, but return to the current income rates over time. Income rates reflect an initial increase of 0.75%, followed by income rates that increase or decrease by 0.25% each year as compared to the current income rate scenario, to a maximum difference of 0.75%. The calendar year returns are based on the indices listed above, but are adjusted to reflect slightly above-average volatility. 6 SUN LIFE GIFS ILLUSTRATION TOOLS ECONOMIC SCENARIOS GUIDE

7 INCOME SERIES CALENDAR YEAR RETURNS Below are the calendar year returns used for each income rate scenario available. In the illustration tool and report, the returns will repeat until the annuitant reaches age 100. Years Current (%) Increasing (%) Decreasing (%) Volatile (%) Average Standard deviation The average return was calculated using the geometric mean, which is a common method of calculating investment returns. 6 Standard deviation is a statistical measurement that provides information on historical volatility and is used to measure the historical risk of an investment. Generally, the more risky an investment is, the higher the standard deviation will be. A volatile investment will have a higher standard deviation while a less risky investment will have a lower standard deviation. 7 SUN LIFE GIFS ILLUSTRATION TOOLS ECONOMIC SCENARIOS GUIDE

8 Sun Lifetime Advantage GIF CALENDAR YEAR RETURNS Years (%) Strong early Poor early High volatility (%) (%) (%) (%) Average Standard deviation The average return was calculated using the geometric mean, which is a common method of calculating investment returns. 8 Standard deviation is a statistical measurement that provides information on historical volatility and is used to measure the historical risk of an investment. Generally, the more risky an investment is, the higher the standard deviation will be. A volatile investment will have a higher standard deviation while a less risky investment will have a lower standard deviation. 8 SUN LIFE GIFS ILLUSTRATION TOOLS ECONOMIC SCENARIOS GUIDE

9 SUN LIFETIME ADVANTAGE GIF INCOME RATE SCENARIOS Income rates Income rates are based on a number of factors and are subject to change daily. For current rates, please visit Income rate scenarios The illustration tool depicts four income rate scenarios: current, increasing, decreasing and volatile. These different scenarios show how the product can work in a variety of environments. CURRENT INCOME RATE SCENARIO This scenario uses current income rates and assumes they don t change. The calendar year returns are based on historical returns for the indices on page 3. INCREASING INCOME RATE SCENARIO This scenario assumes that income rates are slightly higher than the current income rates. It uses income rates that have been adjusted 0.70% upwards from the current income rate scenario. The calendar year returns are adjusted to reflect slightly below-average returns. DECREASING INCOME RATE SCENARIO This scenario assumes that income rates are slightly lower than the current income rates. It uses income rates that have been adjusted 0.70% downwards from the current income rate scenario. The calendar year returns are adjusted to reflect slightly above-average returns. VOLATILE INCOME RATE SCENARIO This assumes that income rates increase and decrease from the current income rates, but return to the current income rates over time. Income rates reflect an initial increase of 0.75%, followed by income rates that increase or decrease by 0.25% each year as compared to the current income rate scenario, to a maximum difference of 0.75%. The calendar year returns are adjusted to reflect slightly above-average volatility. 9 SUN LIFE GIFS ILLUSTRATION TOOLS ECONOMIC SCENARIOS GUIDE

10 SUN LIFETIME ADVANTAGE GIF INCOME RATE SCENARIO COMPARISON The table below shows the increase or decrease over current rates in each scenario. For example, in year 3 of the increasing rate scenario, the client receives an income rate of 0.20% higher than the current income rate offered. Years Increasing Decreasing Volatile SUN LIFE GIFS ILLUSTRATION TOOLS ECONOMIC SCENARIOS GUIDE

11 About Sun Life Financial Founded in 1865, Sun Life Financial has helped Canadians manage and grow their assets for over 150 years. FINANCIAL STRENGTH, DISCIPLINED RISK MANAGEMENT International financial services provider with total assets under management of $903 billion* One of Canada s oldest, most trusted financial institutions, recognized for sustainability and proven, disciplined risk management INVESTMENT MANAGEMENT EXPERTISE Investment funds from leading global portfolio managers Focus is on risk management through experience, insight and innovation LEADING PRODUCTS AND SERVICE Full suite of leading insurance and investment products for individuals and corporate customers Strong commitment to service excellence * As of December 31, 2016, for the Sun Life Financial group of companies. Life s brighter under the sun Any amount that is allocated to a segregated fund is invested at the risk of the contract owner and may increase or decrease in value. Sun Life GIFs are individual variable annuity contracts issued by Sun Life Assurance Company of Canada, a member of the Sun Life Financial group of companies. Sun Life Assurance Company of Canada, Digital-08-17